Lyon v. Ty-Wood Corp.

• Decision Date: 20 March 1968
• Docket Number: TY-WOOD
• Citation: 212 Pa.Super. 69,239 A.2d 819
• Parties: , 5 UCC Rep.Serv. 27 Maurice LYON, t/a Monarch Oil Company, Appellant, v.CORPORATION and Greensburg Plaza, Inc.
• Court: Pennsylvania Superior Court

Page 819

239 A.2d 819

212 Pa.Super. 69, 5 UCC Rep.Serv. 27

Maurice LYON, t/a Monarch Oil Company, Appellant, v. TY-WOOD CORPORATION and Greensburg Plaza, Inc.

Superior Court of Pennsylvania.

March 20, 1968.

David F. Alpern, Alpern & Alpern, Pittsburgh, for appellant.

John B. Nicklas, Jr., Maiello, McCrady & Nicklas, Pittsburgh, for appellee.

Before ERVIN, P.J., and WATKINS, MONTGOMERY, JACOBS, HOFFMAN, and SPAULDING, JJ.

SPAULDING, Judge.

This is an appeal from a judgment of the County Court of Allegheny County entered in favor of Greensburg Plaza (Greensburg), appellee, in a garnishment proceeding brought by Maurice Lyon, trading as Monarch Oil Company (Monarch), appellant-plaintiff.

Under a contract dated July 8, 1962, Ty-Wood Corporation performed certain excavation work for Greensburg. On March 7, 1963 Ross Scott, president of Ty-Wood, assigned to Thomas and Dorothy Scott $25,000 of funds due Ty-Wood from Greensburg. The basis for this assignment was advances to Ty-Wood from Thomas Scott over a period of years beginning in 1960. On January 13, 1964 a second assignment was executed covering all the remaining funds due Ty-Wood from Greensburg.

In a separate action, Monarch obtained a default judgment against Ty-Wood on July 16, 1964 and on August 18, 1964 issued execution naming Greensburg as garnishee. Subsequent interrogatories and answers disclosed the assignments to Thomas and Dorothy Scott, while answers to additional interrogatories disclosed there were no amounts owing from Greensburg to Ty-Wood, that claim having been settled in a federal court action of March, 1966 by Greensburg's payment of $31,000 to Thomas and Dorothy Scott as assignees of Ty-Wood's claim.

Monarch, whose judgment with interest against Ty-Wood amounted to $5,039.22, alleges that the prior assignments constituted unperfected security interests under Article 9 of the Uniform Commercial Code ^* and are subordinate to the claim of Monarch, which was without notice of the assignment.

The court below, sitting without a jury, initially found in favor of Monarch, but reversed its position upon consideration of exceptions filed by Greensburg and held 'the parties to the assignments intended that they effect an assignment, absolute and unqualified, of the assignor's right to receive certain moneys * * * in payment of the assignor's debt to the assignee.'

This finding, then, frames the sole issue on appeal: did the transactions between defendant Ty-Wood and the Scotts constitute security interests which were, under the Code, unperfected and therefore subordinate to appellant's attachment, or were they absolute assignments in payment of a pre-existing debt, in which case the filing provisions of the Code are inapplicable?

As stated in the comments to the Uniform Commercial Code: 'The aim of this Article (9) is to provide a simple and unified structure within which the immense variety of present-day secured financing transactions can go forward with less cost and with greater certainty. * * * (T)he article applies to all transactions intended to create security interests in personal property * * *.' 12A P.S. § 9--101, comment, p. 333. 'The principal test whether a transaction comes under this Article is: is the transaction intended to have effect as security?' Id. § 9--102, comment, p. 335. In the instant case, then, we must examine the business activities, the objectives and the relationship of the parties to ascertain this intent and on that basis determine whether the transactions in question legally constitutes an absolute assignment or a security interest. Such a determination, i.e., whether certain facts as found by a trial court constitute a specific legal act, is proper for this court. Cf., Fiore v. Fiore, 405 Pa. 303, 174 A.2d 858 (1961); Bolton v. Stillwagon, 410 Pa. 618, 190 A.2d 105 (1963).

The record discloses that from 1960 through January, 1964 Thomas Scott made loan advances to his brother Ross Scott and/or Ty-Wood Corporation totaling $57,582. The initial assignment of March 7, 1963 recites that Ty-Wood is entitled to approximately $30,000 due on contract from Greensburg and that Ty-Wood is indebted to Thomas and Dorothy Scott in the amount of $25,000 'which money was used by the assignor for the completion of the contract.' The Assignment then states: 'Ty-Wood Corporation does hereby * * * assign the sum of (25,000) to the Assignees * * * from the balance of the proceeds...